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                            US ECONOMY IMPACT ON INDIA

The US Economy which is the largest economy in the world has been at the centre for all the developments at the global level.  The size of US economy is $ 21 trillion i.e. around 23 % of the total world GDP.

US increasing corporate tax:- The US Government is likely to increase their corporate tax rate in US as it would be in needs of funds to fund its 2 trillion dollar infra spending plan. This might result in many companies shifting their base to other countries like India which have lowered corporate tax rate in 2019. Biden proposes the increase the corporate tax from 21% to 28 %. This would be applicable to foreign multinational companies.

 

US plans for $ 2 trillion infra spending:- The spending on the Infrastructure will push the GDP growth for the US economy. This may lead to higher inflation and finally higher Interest rates in the US. The higher GDP growth in the US will put pressure on EU also to increase the interest rates.

Outflow from Indian stock Markets:-  The FII have already reduced the flows into Indians stock markets in March 2021 to the tune of Rs. 9000 crore as compared to Rs. 25000 crore in Jan 2021 and 19000 crore in Feb 2021. With the rise in the US bond yield and better performance of the US economy, there could be strong CAPITAL FLIGHT from Indian stock market back to US.

 

Impact on Indian Economy:- Indian Economy had reduced the corporate tax rate cut from 33 % to 22 % in 2019 and also reduced the tax rate to 15 % for manufacturing companies who start their production before 1st April 2023. The US decision to rise the corporate tax their could make companies think to shift their manufacturing base to India. India is right now at one of the lowest tax rates in the world especially when it comes to manufacturing.

Improved GST collections:-

o GST collections were at Rs. 1.23 lakh crore. All time high collections

o It is 27 % high than last year march 2020 collection

o GST revenue witnessed growth rate of (-) 41%, (-) 8%, 8% and 14% in the first, second, third and fourth quarters of this financial year, respectively, as compared to the same period last year

o Closer monitoring against fake-billing, deep data analytics using data from multiple sources including GST, Income-tax and Customs IT systems and effective tax administration have also contributed to the steady increase in tax revenue over last few months, the government claimed.

 Rise in COVID Cases:-  The rise in the COVID cases suddenly created a public perception that  in order to benefit Pharma companies, Govt is claiming that COVID cases are at 62000 mark. In January end 2021 the Govt was claiming that COVID will be over by Feb 2021 end. The fact is that in those states where there is elections and so many rallies are being held, there is no mention of COVID.

Impact of Night curfew:- The night curfew has lead to huge losses to restaurants, hotels, transport companies as people cannot go out after 9 pm. This has lead to huge business losses and unemployment has also raised in the cities. In Gujarat around 15000 people have committed suicide in last one year. This are official figure so just imagine how many actually would have lost lives.

Closure of schools and colleges:-  In states like Gujarat, since schools and colleges are again closed and online education started, parents are not paying the fees since they feel that when college infrastructure is not getting used, why should we pay the fees. This has lead to risk to the jobs of so many faculties.

Suggestions:-

1.  No lock down as it would devastate the economy fully.

2.  Promote online teaching and working as far as possible so that people are not forced to go to offices. The rise in cases in Maharashtra is mainly because local train was started as office owners were pressuring employees to come to office.

3.  Allow cinema halls, restaurants to work with 50 % capacity. This will save jobs which otherwise would get lost as earning of malls, cinema halls have done down drastically.

4.  Airlines to allowed with only 50 % sitting capacity

5.  Vaccination for all above the age of 18 years so that more people can be given vaccine which will create positivity among the general people.


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